Mesa Bottle Company (MBC) manufactures plastic twoliter bottles for the beverage
ID: 2449403 • Letter: M
Question
Mesa Bottle Company (MBC) manufactures plastic twoliter bottles for the beverage
industry. The cost standards per 100 twoliter bottles are as follows:
Standard cost per 100 two liter
Cost Category Bottles
Direct labor $1.42
Direct materials 5.96
Factory overhead 0.40
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Total $7.78
At the beginning of July, MBC management planned to produce 560,000 bottles.
The actual number of bottles produced for July was 620,000 bottles. The actual
costs for July of the current year were as follows:
Actual cost for the month ended
Cost Category July 31, 2015
Direct labor $9,680
Direct materials 35,960
Factory overhead 2,475
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Total $48,115
a. Prepare the July manufacturing standard cost budget (direct labor, direct
materials, and factory overhead) for WBC, assuming planned production.
b. Prepare a budget performance report for manufacturing costs, showing the total
cost variances for direct materials, direct labor, and factory overhead for July.
c. Interpret the budget performance report.
Explanation / Answer
b)
$32,640
Warwick Bottle Company Manufacturing Cost Budget For the Month Ended March 31, 2014 Standard Cost at Planned Volume (560,000 Bottles) Manufacturing costs: Direct labor $7,952 Direct materials $33,376 Factory overhead $2,240 Total $41,328b)
Warwick Bottle Company Manufacturing Costs-Budget Performance Report For the Month Ended March 31, 2014 Actual Costs Standard Cost at Actual Volume (620,000 Bottles) Cost Variance-(Favorable) Unfavorable Manufacturing costs: Direct labor $ 9,680 $8,804 -118.00 Direct materials $35,960 $36,952 -606.00 Factory overhead $1,550 $2,480 14.00 Total manufacturing cost $2,475$32,640